Posts Tagged ‘downgraded

10
Aug
11

‘burned on a teacup’

Mark Mellman (The Hill): Make no mistake: Republicans castigating President Obama for S&P’s ill-considered downgrade are akin to a mugger attacking the mayor, then blaming the sheriff for “letting” him do it.

Republican members of Congress attacked the full faith and credit of the United States by arguing publicly that defaulting on our debts would not be so bad. No rating agency can hear that and remain confident America feels bound and determined to pay its bills.

When every serious GOP economist and most every Republican who has carefully investigated the issue – from Sen. Tom Coburn to former Sen. Alan Simpson – conclude that both spending cuts and revenue increases are required to restore our fiscal heath, but Republican leaders announce they will refuse to appoint anyone to the supercommittee who might even consider eliminating billions in subsidies to oil companies, they not only subordinate the national interest to the interests of Big Oil, they also send an unmistakable message to rating agencies that they aren’t serious about restoring fiscal discipline, thereby mugging America’s credit rating. Then they attack President Obama for what – allowing them to speak freely, if foolishly?

… “Tea Party” is becoming a dirty word …. Republicans running for every office from president to dog catcher are forced to pledge fealty to a group that is increasingly scorned by the American people.

The same could be said of the GOP itself. Just this week CNN/ORC pollsters found 59 percent of Americans harboring unfavorable views of the Republican Party, while only 33 percent offered favorable opinions. At no point in the last two decades has opinion of the Republican Party been so negative …. (While hardly loved, Democrats are 26 points better off than the GOP.)

…. Americans want compromise and moderation, while Republicans emerge from this crisis looking uncompromising in their extremism. Public preference for compromise is clear – three recent polls found 66 percent to 85 percent saying they would rather the parties compromise than stick to their principles.

But the GOP failed this test … Being uncompromising, extreme and in thrall to a movement that is becoming a pariah will hurt the GOP. Unfortunately, it hurts the country even more.

Full article here

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Gallup

10
Aug
11

surprise, surprise!

HughBoyOhBoy (DK): I did some checking this afternoon on the Federal Election Commission’s database of financial contributors to political candidates. Within minutes I found that Harold W. McGraw III, the Chairman, President, and CEO of Standard & Poor’s parent company, is a big money contributor to lots of Republicans.

Repeat recipients of McGraw’s largess include Mitt Romney, George W. Bush, the National Republican Congressional Committee, the National Republican Senatorial Committee, something called the Bush-Cheney Compliance Committee, and many more Republicans …. He has never given any money to the Obama campaign nor any to the Democratic Party.

Gee, how convenient. Standard and Poor’s issues a politically biased rating with a $2 trillion error. Republicans wave that rating around like Moses just brought it down from the mountain as verification of their defamation about the Obama presidency. And the head of the company making those ratings happens to give money to the likes of Mitt Romney and the Republican Party…

Thanks Fred

08
Aug
11

the, um, liberal media

SFGate: The Standard & Poors’ rating agency decision to reduce the United States’ long term debt from AAA to AA+ was explained in a press release that specifically mentioned “the majority of Republicans in Congress continue to resist any measure that would raise revenues,” should, itself, make headlines like “Standard And Poors Blames U.S. Credit Rating Reduction On Republicans.”

But the fact is, some publications, most notable The Associated Press and Politico, are working (thus far) to cover up S&P’s finger-pointing at Republicans. Instead, they appear to be pointing their own fingers at President Obama – someone not mentioned in the Standard and Poor’s press release.

Take Jonathan Allen in Politico: Standard & Poor’s delivered an unambiguous message to investors Friday that has serious implications not only for the nation’s economy but also for President Barack Obama, the tea party and anyone else with skin in the 2012 elections: America’s political system is subprime.

That was how Allen started off his article. In it, there was zero mention of the two very damaging statements S&P used in its press release, and directly aimed at Republicans….

… Allen’s Politico article had a lot of Republican quotes, not many Democratic quotes, and in all failed to tell the truth of Standard & Poor’s message.

And then there’s the Associated Press’ article by Martin Crutsinger. It fails to include, or mention Standard & Poors’ GOP-directed press release quotes….

…. It’s purely irresponsible for The Associated Press and Politico to fail to accurately report the contents of the Standard and Poors press release. If The Associated Press and Politico want to damage President Obama, they should just come out and say so. Heck, Senate Majority Leader Mitch McConnell said that his objective was to make President Obama “A one-term President”….

Full post here

Thanks Ladyhawke

06
Aug
11

timeline

Larger version of chart here

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Steve Benen:

1980: Ronald Reagan runs for president, promising a balanced budget

1981 – 1989: With support from congressional Republicans, Reagan runs enormous deficits, adds $2 trillion to the debt.

1993: Bill Clinton passes economic plan that lowers deficit, gets zero votes from congressional Republicans.

1998: U.S. deficit disappears for the first time in three decades. Debt clock is unplugged.

2000: George W. Bush runs for president, promising to maintain a balanced budget.

2001: CBO shows the United States is on track to pay off the entirety of its national debt within a decade.

2001 – 2009: With support from congressional Republicans, Bush runs enormous deficits, adds nearly $5 trillion to the debt.

2002: Dick Cheney declares, “Deficits don’t matter.” Congressional Republicans agree, approving tax cuts, two wars, and Medicare expansion without even trying to pay for them.

2009: Barack Obama inherits $1.3 trillion deficit from Bush; Republicans immediately condemn Obama’s fiscal irresponsibility.

2009: Congressional Democrats unveil several domestic policy initiatives …. which would lower the deficit. GOP opposes all of them, while continuing to push for deficit reduction.

September 2010: In Obama’s first fiscal year, the deficit shrinks by $122 billion. Republicans again condemn Obama’s fiscal irresponsibility.

October 2010: S&P endorses the nation’s AAA rating with a stable outlook….

November 2010: Republicans win a U.S. House majority, citing the need for fiscal responsibility.

December 2010: Congressional Republicans demand extension of Bush tax cuts ….. GOP continues to accuse Obama of fiscal irresponsibility.

March 2011: Congressional Republicans declare intention to hold full faith and credit of the United States hostage – a move without precedent in American history – until massive debt-reduction plan is approved.

July 2011: Obama offers Republicans a $4 trillion debt-reduction deal. GOP refuses, pushes debt-ceiling standoff until the last possible day, rattling international markets.

August 2011: S&P downgrades U.S. debt, citing GOP refusal to consider new revenues. Republicans rejoice and blame Obama for fiscal irresponsibility…..

Full post here

Tweeters? Tweet it! Please use the direct link to Steve Benen’s blog (here) rather than to mine – the more people who read this guy the better ;-)

06
Aug
11

saturday – the downgrade

First, the President’s weekly address:

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Zachary Karabell (The Daily Beast): Math-challenged and politically-driven, S&P’s Friday night credit demotion puts the ratings agency on par with the Tea Party. Zachary Karabell on why that’s dangerous.

…. Let’s be clear: Congress and the White House did not cover themselves with glory during the debt debate throughout July. The United States has a stalled economy and a large amount of debt. But on so many levels, this downgrade is absurd.

…. there is the question of math. When S&P informed the White House of its intention to downgrade on Friday afternoon, the Treasury Department took issue with S&P’s math and claimed that their assessment of the trends of the U.S. debt burden and its ratio to GDP was off by trillions of dollars. No matter. After a brief review, the wizards at S&P went ahead and removed an A.

… I have no criticism of an academic theory about how nations function economically. But when debatable theories become the underpinnings of decisions by unelected individuals who run organizations with significant sway (sway ceded to them by governments throughout the 20th century), then we have a problem …. drawing on theories about the “right” level of debt puts S&P in a strange bedfellow alliance with the Tea Party.

The people who run the ratings agencies are welcome to their analysis, as is the Tea Party. But if Rogoff and Reinhart or the Tea Party announced that they were downgrading U.S. sovereign debt, they would be laughed for their audacity. Yet when it is one of the anointed ratings agencies, there is this sudden need to genuflect.

… The company assailed the Washington culture of “brinkmanship” so in display during the debt ceiling fiasco, and used that as the primary reason to take us down a notch. Excuse me, but since when is a pristine political process a key ingredient to good credit? Are we supposed to have civil politics in order to maintain the rating?

…. There is not a scintilla of evidence that the political process has yet impeded the ability of the United States to meet its debt obligations, even with the debt ceiling brinkmanship….

Finally, as a symbol that the United States is sliding off the rails, the downgrade is potent … the actions of S&P are part of problem and not just an independent verification that one exists.

These agencies have been elevated to heights that should not ascend; they have been chronically wrong and late in the past; and their rationale for a downgrade sounds more like a prim distaste for a dysfunctional political process that a reasoned assessment of the ability of the United States to discharge its obligations. No defense can be offered of our current political system or near-term economic prospects. But S&P – already on overreach as “neutral” judge of American creditworthiness – has no special standing to rule on the political system, and using that as a cudgel to prove their own power is a destructive act.

Full post here

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Politicususa: … Reality denying Republicans have already tried to shift the blame to Obama for the debt downgrade, but it is important to state the obvious. If Republicans would have passed a clean debt ceiling extension, the downgrade would have never happened. The GOP’s political recipe for bringing Obama down of one part chaos and one part obstruction was never going to allow that to happen. Many Republicans wanted the debt downgrade because it plays into their political strategy for 2012.

Whether or not S&P’s numbers are off, and with Standard and Poor’s track record they very well could be, the political point can’t be ignored. S&P downgraded our debt because our political leaders can’t agree on anything….

… The S&P can be described as a troubled and flawed organization at best. They took a justified beating from Democrats for their role in helping to cause the financial crash of 2008. It wouldn’t be much of a surprise if the people at S&P saw this as a chance for a bit of reputation enhancement and political payback.

In economic terms, S&P is one of three ratings agencies. As long as the other two agencies keep the US rating at AAA there should be little impact from S&P’s decision. The biggest impact will be likely felt politically, not economically.

Republicans can try to blame Obama all they want, but they the ones who ginned up a crisis out of thin air, and they are party that has forced the United States of America’s debt to be downgraded for the first time in this nation’s glorious history.

The message to Obama and the Democrats is simple. They can’t fix this. Republicans are hell bent on making sure that the economy doesn’t recover. This reality leaves Democrats with two choices. They can either battle with the Republicans thus adding to the gridlock that is trashing the economy, or they can compromise and flush the economy down the drain.

It is a lose-lose situation that has no hope of improving unless the voters wake up and remove the Republicans from the House majority in 2012. Until then the American people are going to force fed a buffet of embarrassment, humiliation, and failure prepared by the master chefs of economic destruction in the Republican Party.

Eat up America. This is government that you voted for in 2010.

Full article here

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Krugman

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Steve Benen: Before we get into Standard & Poor’s decision to downgrade United States debt, it’s worth appreciating the events that immediately preceded the announcement.

Officials from Standard & Poor’s provided documents to the Treasury Department, explaining the downgrade. Obama administration officials noticed a problem: the S&P numbers didn’t add up:

…..A Treasury staff member noticed the $2 trillion mistake within the hour, according to a department official. The Treasury called the company and explained the problem. About an hour later, the company conceded the problem but did not indicate how it planned to proceed, the official said. Hours later, S.& P. issued a revised release with new numbers but the same conclusion.

Got that? S&P prepared an analysis to justify a specific conclusion. The analysis was off by $2 trillion. Treasury explained to S&P that the analysis wasn’t even close to being accurate, which led the ratings agency to concede they’d made a mistake.

And a few hours later, S&P decided to reach the same conclusion anyway. The agency wanted to proceed with a downgrade; whether its numbers added up was irrelevant.

That certainly inspires confidence in the integrity of Standard & Poor’s decision making, doesn’t it?

I’m reminded of something Joe Klein said in April, after S&P first started making threats about this.

….. Hey, weren’t you the same guys who gave AAA ratings to the repackaged subprime mortgage-backed securities that, in truth, were utter dreck? And didn’t that help cause the 2008 economic collapse? And didn’t subsequent accounts reveal that you were in bed with the banks whose products you were supposed to be rating? I mean, you guys are still in business? Amazing.

Full post here

05
Aug
11

downgraded

Paul Krugman: OK, so Standard and Poors has gone ahead with the threatened downgrade. It’s a strange situation.

On one hand, there is a case to be made that the madness of the right has made America a fundamentally unsound nation. And yes, it is the madness of the right: if not for the extremism of anti-tax Republicans, we would have no trouble reaching an agreement that would ensure long-run solvency.

On the other hand, it’s hard to think of anyone less qualified to pass judgment on America than the rating agencies. The people who rated subprime-backed securities are now declaring that they are the judges of fiscal policy? Really?

Just to make it perfect, it turns out that S&P got the math wrong by $2 trillion, and after much discussion conceded the point – then went ahead with the downgrade.

More than that, everything I’ve heard about S&P’s demands suggests that it’s talking nonsense about the US fiscal situation. The agency has suggested that the downgrade depended on the size of agreed deficit reduction over the next decade, with $4 trillion apparently the magic number. Yet US solvency depends hardly at all on what happens in the near or even medium term: an extra trillion in debt adds only a fraction of a percent of GDP to future interest costs, so a couple of trillion more or less barely signifies in the long term. What matters is the longer-term prospect, which in turn mainly depends on health care costs.

So what was S&P even talking about? Presumably they had some theory that restraint now is an indicator of the future – but there’s no good reason to believe that theory, and for sure S&P has no authority to make that kind of vague political judgment.

In short, S&P is just making stuff up – and after the mortgage debacle, they really don’t have that right.

So this is an outrage – not because America is A-OK, but because these people are in no position to pass judgment.

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I ignore Krugman’s political views, he’s fast becoming the left’s Bachmann (clueless and marginally bonkers), but when he concentrates on an area he actually knows something about (economics) he can, occasionally, be interesting. I’ve read him before going on about Standard and Poors so I reckoned he wouldn’t be impressed with the downgrade news. He’s, eh, not!

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UPI: …. another government official said the White House had told S&P the company’s thinking was “based on flawed math and assumptions.” And S&P acknowledged “its numbers are wrong.”

An administration official told NBC News after the credit rating was lowered, “It’s amateur hour at S&P.”

The official said the administration showed S&P where its computation errors occurred.

Rep. Barney Frank, the ranking member on the House Financial Services Committee, said on MSNBC the decision was “just a political judgment by a group of incompetents.”

“This is the rating agency that took money from people who were selling junk bonds and told other people to buy it,” Frank said, accusing S&P of overvaluing private debt while consistently undervaluing public debt. They are as responsible for the financial crisis as anybody else. There is zero chance of (the United States) defaulting,” Frank said.




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